Issue Of ESOPs: Deduction Allowed On Discount

In a significant ruling in the case of Biocon Limited ("taxpayer"), the Bangalore Special Bench ("SB") of the Income Tax Appellate Tribunal (“Tribunal”) has laid down important principles in context of discount on issue of options under an Employee Stock Option Plan ("ESOP").  In this case, the SB has ruled that the taxpayer is entitled to deduction under section 37(1) of the Income-tax Act, 1961 ("Act"), with regard to the discount on stock options granted, over course of the vesting period. In this alert, BMR Edge has summarized the facts of the case and the ruling of the SB of the Tribunal.

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